Unleashing the Supply Side

11/1/2006

By more closely allying themselves with manufacturers at all points along the supply chain continuum, retailers can do a better job of serving their customers and bolstering their own bottom line. And technology is becoming the linchpin of such partnerships.

Vendors concede that the cost of deploying solutions intended to forge tight merchant/supplier links can reach the high-six-figures or more, depending on complexity. However, statistics make a strong case for deployment. According to research firm Aberdeen Group, retailers see a 0.5 percent to 1.8 percent increase in margins through collaboration with suppliers; the latter group's performance also improves by an average of 61 percent when retailers share performance data with them. Other benefits of retailer/supplier partnerships facilitated via some manner of technology include a 30 percent drop in cycle times, a three percent to five percent reduction in the cost of goods and a 10 percent to 15 percent increase in gross margin through increased international sourcing.


A United Sourcing Front

Unification and streamlining of sourcing endeavors is one way in which retailers are leveraging technology for partnership purposes, in turn boosting sales. Among such merchants is Guitar Center, a Westlake Village, California operator of 183 Guitar Center stores as well as of 90 Music & Arts band instrument stores, a catalog operation and a Web site. Earlier this year, Guitar Center streamlined its global sourcing operations through the implementation of a new software application. The TradeStone Suite from TradeStone software helped the retailer to expand its private brand offerings and improve gross margins.

With the solution in place, the merchant can quickly create Requests for Quotes (RFQs) and put those quotes out for bid by manufacturers worldwide, says Steven Kitay, Guitar Center's director of product and brand management.

By normalizing currencies, languages, lead times and automatically calculating the estimated landed costs for goods, Guitar Center is able to easily and accurately compare offers from different manufacturers, no matter what their location. "For us, the (technology) unifies a number of separate and disparate communication threads into a singular, streamlined platform," Kitay says. The communications consolidation it affords "allows manufacturers, product managers and buyers to literally be on the same page, confirming specs, viewing and exchanging images and requesting quotes -- all in real-time."

Kitay adds that because of these capabilities, the application has wrought a "dramatic" reduction in the risks inherent in global sourcing, eliminating production and shipping delays that lead to lost sales.


Hooking Up

Retailers also are building sales-sparking partnerships by utilizing technology to widen general lines of communication up and down the supply chain. For example, Golfsmith, a 52-unit, Austin, Texas-based cross-channel retailer of golf and tennis equipment, merchandise and training products, has built the Vendor Information Portal (VIP), a gateway for e-business collaboration with all of its suppliers. Built on the nuBridges truExchange eBusiness Platform and deployed earlier this year, the IP is intended to forge rapid connectivity between Golfsmith and several hundred of its suppliers, as well as to yield the retailer a central hub for monitoring its entire supply chain.

The gateway is delivering on its promise of better sales, notes Jim Thompson, Golfsmith's president and CEO. "The gateway gives our suppliers the flexibility to connect with us easily, (expediting) the entire process from order to shipment to invoice to payment and improving sales cycles for (us) and our suppliers," he notes. "Most importantly, it allows us to be more responsive to our customers."

Toward a related end, department store chain Kohl's, which has 749 stores and is headquartered in Menomonee Falls, Illinois, is supporting its e-commerce endeavors via the Connection Hub and Drop-Ship Master solutions offered by CommerceHub. Kohl's selected the two solutions in mid-August, the former, with the goal of broadening its product offerings to better suit consumer demand while avoiding inventory carrying charges and the latter, to grow its online business.

Kohl's is using the Drop-Ship Master fulfillment platform to manage orders through suppliers rather than from its own warehouses. Orders received on the Kohl's Web site are transmitted through the platform to suppliers, which in turn ship product directly to consumers. Kohl's maintains visibility into orders from point of sale to delivery, says Mike Molitor, senior vice president, e-commerce, "ensuring that customer demands are always met in the most efficient manner possible so that brand equity is never compromised."

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